Govt collapse triggers French equities’ steepest fall in over a month

FRANKFURT: European stocks recouped their losses on Monday after the fall triggered by the unexpected resignation of French Prime Minister Sebastien Lecornu was offset by a rally in semiconductor stocks following AMD’s chip supply deal with OpenAI.

The pan-European STOXX 600 closed flat. The index briefly hit an intraday record high on Monday after climbing more than 2.8 percent last week.

French stocks tumbled 1.4 percent, marking their steepest one-day drop since August and snapping a six-day winning streak, after Lecornu abruptly resigned just hours after unveiling his new cabinet.

French bond yields spiked, with the 10-year note hitting a one-week high, while the euro weakened.

Investors remain wary of France’s fiscal health, as the country holds the euro zone’s largest budget deficit - nearly double the EU’s 3 percent threshold.

French luxury stocks took a hit, with LVMH, EssilorLuxottica, and Hermes sliding over 2.3 percent each.

Banks also bore the brunt, with SocGen and BNP Paribas plunging 3.2 percent and 4.2 percent respectively.

Mid-cap French stocks fell 1.7 percent.

Political instability has plagued France since President Emmanuel Macron’s 2022 re-election, with no party commanding a parliamentary majority.

“The political turmoil in France isn’t new. It’s just another confirmation of the fragility within the political system in France and how hard it is for them to be able to maintain a government,” said Daniela Hathorn, senior market analyst at Capital.com.

French blue-chips have lagged European peers so far this year, up over 7 percent compared to double-digit gains seen in most developed countries.

On the European markets more broadly, oil and gas gained 1.3 percent tracking higher oil prices after OPEC+’s planned production increase for November was more modest than expected.

European semiconductor companies rose after AMD’s chip supply deal with OpenAI. BESI jumped 12.4 percent while ASML rose 2 percent.